5 Things To Do Right Now To Safeguard Your Retirement Savings
Written by
Crystal Mayer
Edited by
Jenna Klaverweiden
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Many people spend their entire adult lives saving for retirement, but few people take the steps necessary to protect their investment.
While many people may think that they have stowed away enough money for a fully funded account, they may not have factored in major costs like health insurance or focused on paying off debt. Ensuring there is enough money to last 20 or even 30 years after you stop working is critical.
Here are five things to do right now to safeguard your retirement savings.
1. Factor In Health Insurance
A large expense that many retirees fail to factor in is health insurance. According to Fidelity Investments, health insurance expenses for a 65-year-old cost $172,500, on average. As people continue to live longer, health insurance costs could continue to rise. Being prepared for these costs can help ensure a more stable financial future.
In addition to normal healthcare expenses, many retirees may need long-term care. Long-term care expenses, including a bed or room at a nursing home, can exceed six figures. Retirees who want to safeguard the money they have invested for retirement need to factor in these costs and may want to consider insurance to help cover expenses.
2. Understand Inflation
According to the Center for Retirement Research at Boston College, high inflation can impact both retirees and near retirees.
Understanding that increases in cost of living can cause financial harm in the future is critical to ensuring a healthy savings through the duration of retirement. Preparing and budgeting for rising costs is essential, particularly for retirees on a fixed income.
3. Work With a Financial Advisor
One of the most effective ways a person can protect their retirement is by working with a financial advisor.
A financial advisor can help ensure that retirement goals are set, met and kept. They can provide calculations for how inflation may affect retirement savings and help plan and budget for healthcare expenses.
4. Pay Off Debt
One thing retirees should not have to worry about during their golden years is paying off debt. Spending the years leading up to retirement ensuring that debt, particularly unsecured debt like credit card debt, is paid off is wise.
Unfortunately, retirees are now carrying more debt than ever. As reported in an AARP article, debt quadrupled for individuals between the ages of 65 to 74 from 1992 to 2022, and it increased sevenfold for individuals 75 and up.
5. Review Withdrawal Strategy
Retirement cannot be based on a “set it and forget it” strategy. As explained by the U.S. Department of Labor, withdrawing early can lead to tax complications and will ensure that principal and interest are lost. After retirement, withdrawing too much can result in not having enough long-term savings. Many retirement accounts are calculated based on compounding interest.
Withdrawing too much can affect the projections and may lead to shortcomings. Consistently reviewing a withdrawal strategy can help make sure that retirement accounts remain fully funded. According to Fidelity, retirees should aim for a conservative withdrawal strategy of 4% to 5% during the first year of retirement and then adjust in subsequent years for inflation.
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